Growth in Housing Permits Slows

According to the Census Bureau, there were 75,800 housing permits filed in March 2013. This is the highest number of housing permits filed in March since March 2008. Also, housing permits grew at a rate of 12.5% compared to last March. The is the slowest rate of month-over-month growth since December 2011. Consequently, the annual rate of change has seen slower the growth each of the last two months. In the last year, housing permits have jumped up noticeably from where they were in 2009-2011. However, the level of housing permits is still close to the bottom of previous recessions.

In the current environment of zero interest rates from the Federal Reserve, the real Fed funds rate is a good leading indicator of housing permits. While the real Fed funds rate is still negative, which encourages borrowing, the year-over-year change in the rate has increased for seven consecutive months. Last month, I indicated that this trend in the real Fed funds rate was pointing towards a decelerating rate of growth in housing permits. This month's data confirms that housing permits have entered a period of decelerating growth.